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Retirement tax questions
Hi a2h, good day! Glad that you come to the Special Forum. I'll provide some information to your three questions:
1. What is the special rule about earnings in the first year of retirement?
A portion of Social Security retirement and disability benefits may be taxable when income exceeds a taxpayer’s base amount. Certain amounts that are nontaxable for regular income tax purposes are added back to determine taxable Social Security benefits. The base amount is determined by the taxpayer’s filing status.
MFJ $32,000
Single, HOH, QW, MFS (lived apart from spouse all year) $25,000
MFS (lived with spouse at any time during the year) $0
Rate of taxation. Income above a taxpayer’s base amount will result in an inclusion of up to 50% (85% for higher incomes) of the taxpayer’s Social Security benefits on line 6b, Form 1040. If a taxpayer’s income is above the base amount, use the Social Security Benefits Worksheet:
Page 16 of IRS Pub 925 - Worksheet 1
https://www.irs.gov/pub/irs-pdf/p915.pdf
2. All regular social security benefits are subject to the above calculation - Social Security Benefits Worksheet.
Supplemental Security Income (SSI) is not taxable.
3. I believe you were referring to "what income counts" to determine social security benefits for early retirement. They are primarily W-2 wages and self employment income which count toward the Social Security earning limit.
Once it is determined, it is reported on Form 1040, line 6a Social Security Benefits, line 6b Taxable amount.
All your other income, such as wage, interest, dividend, capital gain etc. are ALL reportable on Form 1040 as part of Total Income and Total Adjusted Gross Income.
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